PROMISSORY NOTE

Borrower:

INDUSTRIAL SERVICES OF AMERICA, INC

Account Number:

9580514992

Note Number:

00011

BB&T

Address:

7100 GRADE LN BLDG 1

LOUISVILLE, Kentucky

LOUISVILLE, KY  40213-3424

Date:

December 22, 2006

PROMISSORY NOTE

THE UNDERSIGNED REPRESENTS THAT THE LOAN EVIDENCED HEREBY IS BEING OBTAINED FOR BUSINESS/COMMERCIAL OR AGRICULTURAL PURPOSES.  For value received, the undersigned, jointly and severally, if more than one, promises to pay to BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (the "Bank"), or order, at any of Bank's offices in the above referenced city for such other place or places that may be hereafter designated by Bank, the sum of

TEN MILLION DOLLARS & 00/100

Dollars ( $10,000,000 ), in immediately available coin or currency of the United States of America.

[ ]

Borrower shall pay a prepayment penalty as set forth in the Prepayment Penalty Addendum attached hereto.

Interest shall accrue from the date hereof on the unpaid principal balance outstanding from time to time at the:

[ ]

Fixed rate of ______________ % per annum.

[ ]

Variable rate of the Bank's Prime Rate plus __________ % per annum to be adjusted ____________________ as the Bank's Prime Rate changes.  If checked here [ ], the interest rate will not exceed a(n) [ ] fixed [ ] average maximum rate of _________ % or a [ ] floating maximum rate of the greater of __________ % or the Bank's Prime Rate; and the interest rate will not decrease below a fixed minimum rate of __________ %.  If an average maximum rate is specified, a determination of any required reimbursement of interest by Bank will be made:  [ ] when Note is repaid in full by Borrower [ ] annually beginning on ___________________.

[ ]

Fixed rate of __________ % per annum through ____________________ which automatically converts on ___________________ to a variable rate equal to the Bank's Prime Rate plus __________ % per annum which shall be adjusted ____________________ as such Prime Rate changes.

[X]

The Adjusted LIBOR Rate, as Defined in the Attached Addendum to Promissory Note.

Principal and Interest is payable as follows:

[X]

Principal (plus any accrued interest not otherwise schedule herein) is due in full at maturity on 12/22/2009

[ ]

Principal plus accrued interest)

[ ]

Payable in consecutive _______ installments of [ ] Principal                  ) commencing on _____

                                                                            [ ] Principal and Interest)

and continued on the same day of each calendar period thereafter, in __________ equal payments of $__________, with one final payment of all remaining principal and accrued interest due on ___________________.

[ ]

ChoiceLine Payment Option:  2% of outstanding balance is payable monthly commencing on ____________________ and continuing on the same day of each calendar period thereafter, with one final payment of all remaining principal and accrued interest due on ____________________.

[X]

Accrued Interest is payable Monthly commencing on January 22, 2007 and continuing on the same day of each calendar period thereafter, with one final payment of all remaining interest due on December 22, 2009 .

[ ]

Bank reserves the right in its sole discretion to adjust the fixed payment due hereunder ____________________ on ____________________ and continuing on the same day of each calendar period thereafter, in order to maintain an amortization period of no more than _____ months from the date of the Note.  Borrower understands the payment may increase if interest rates increase.

[X]

Prior to an event of default, Borrower may borrow, repay, and reborrow hereunder pursuant to the terms of the Loan Agreement, hereinafter defined.

[ ]

[ ]

Borrower hereby authorizes Bank to automatically draft from its demand deposit or savings account with Bank or other bank, any payment due under this Note on the date(s) due.  Borrower shall provide appropriate account number(s) for account(s) at Bank or other bank.

      The undersigned shall pay to Bank a late fee in the amount of five percent (5%) of any installment past due for ten (10) or more days.  When any installment payment is past due for ten (10) or more days, subsequent payments shall first be applied to the past due balance.  In addition, the undersigned shall pay to Bank a returned payment fee if the undersigned or any other obligor hereon makes any payment at any time by check or other instrument, or by any electronic means, which is returned to Bank because of nonpayment due to nonsufficient funds.

      All interest shall be computed and charged for the actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days.  In the event periodic accruals of interest shall exceed any periodic fixed payment amount described above, the fixed payment amount shall be immediately increased, or additional supplemental interest payments required on the same periodic basis as specified above (increased fixed payments or supplemental payments to be determined in the Bank's sole discretion), in such amounts and at such time as shall be necessary to pay all accruals of interest for the period and all accruals of unpaid interest from previous periods.  Such adjustments to the fixed payment amount or supplemental payments shall remain in effect for so long as the interest accruals shall exceed the original fixed payment amount and shall be further adjusted upward or downward to reflect changes in the variable interest rate; provided that unless elected otherwise above, the fixed payment amount shall not be reduced below the original fixed payment amount.  However, Bank shall have the right, in its sole discretion, to lower the fixed payment amount below the original payment amount.

      This note ("NOTE") is given by the undersigned in connection with the following agreements (if any) between the undersigned and the Bank:

      Deed(s) of Trust/Mortgage(s) granted in favor of Bank as beneficiary/mortgagee:

[ ]

dated _________________________ in the maximum principal amount of $_________________________

granted by _____________________________________________________________________________

[ ]

dated _________________________ in the maximum principal amount of $_________________________

granted by _____________________________________________________________________________

Security Agreement(s) granting a security interest to Bank:

[X]

dated  12/22/2006  given by INDUSTRIAL SERVICES OF AMERICA, INC.

Pledge and Security Agreement dated

[X]

dated 12/22/2006 given by Industrial Services of America, Inc.

[ ]

Securities Account Pledge and Security Agreement dated ______________________________________,

executed by ___________________________________________________________________________

[ ]

Control Agreement(s) dated _________, covering

[ ] Deposit Account(s)

[ ] Investment Property

[ ] Letter of Credit Rights

[ ] Electronic Chattel Paper

[ ]

Assignment of Certificate of Deposit, Security Agreement, and Power of Attorney (for Certificated

Certificates of Deposits dated _________, executed by _________________________________________

[ ] 

Pledge and Security Agreement for Publicly Traded Certificated Securities dated _____________________

executed by __________________________________________________________________________

[ ]

Assignment of Life Insurance Policy as Collateral dated ______________, executed by _______________

[X]

Loan Agreement dated 12/22/2006 , executed by Borrower and [ ] Guarantor(s).

[ ]

[ ]

      All of the terms, conditions and covenants of the above described agreements (the "Agreements") are expressly made a part of this Note by reference in the same manner and with the same effect as if set forth herein at length and any holder of this Note is entitled to the benefits of and remedies provided in the Agreements and any other agreements by and between the undersigned and the Bank.

      Borrower agrees that the only interest charge is the interest actually stated in this Note, and that any loan or origination fee shall be deemed charges rather than interest, which charges are fully earned and non-refundable.  It is further agreed that any late charges are not a charge for the use of money but are imposed to compensate Bank for some of the administrative services, costs and losses associated with any delinquency or default under this Instrument, and said charges shall be fully earned and nonrefundable when accrued.  All other charges imposed by Bank upon Borrower in connection with this instrument and the loan including, without limitation, any commitment fees, loan fees, facility fees, origination fees, discount points, default and late charges, prepayment fees, reasonable attorneys' fees and reimbursements for costs and expenses paid by Bank to third parties or for damages incurred by Bank are and shall be deemed to be charges made to compensate Bank for underwriting and administrative services and costs, other services, and costs or losses incurred and to be incurred by Bank in connection with this Instrument and the Loan and shall under no circumstances be deemed to be charges for the use of money.  All such charges shall be fully earned and non-refundable when due.

      No delay or omission on the part of the holder in exercising any right hereunder shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or of any other right on any future occasion.  Every one of the undersigned and every endorser or guarantor of this note regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there be available to the holder collateral for this note, and to the additions or releases of any other parties or persons primarily or secondarily liable.

      The failure to pay any part of the principal or interest when due on this Note or to fully perform any covenant, obligation or warranty on this or on any other liability to the Bank by any one or more of the undersigned, by any affiliate of the undersigned (as defined in 11 USC Section (101)(2)), or by any guarantor or surety of this Note (said affiliate, guarantor and surety are herein called Obligor); or if any financial statement or other representation made to the Bank by any of the undersigned or any Obligor shall be found to be materially incorrect or incomplete; or if any of the undersigned shall fail to furnish information to the Bank sufficient to verify the identity of the undersigned as required under the USA Patriot Act; or in the event of a default pursuant to any of the Agreements or any other obligation of any of the undersigned or any Obligor in favor of the Bank; or in the event the Bank demands that the undersigned secure or provide additional security for its obligations under this Note and security deemed adequate and sufficient by the Bank is not given when demanded; or in the event one or more of the undersigned or any Obligor shall die, terminate its existence, allow the appointment of a receiver for any p